Inktomi Corp is going back to being a plain old web search engine provider, following the sale of its enterprise search business to Verity Inc, announced yesterday,

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Coupled with the discontinuation of its caching business, announced this summer, Inktomi is pretty much down to the bare bones on which it was founded back in 1996, while Verity is picking up a way to expand and strengthen its leadership in enterprise search at a bargain basement price.

The purchase price of $25m looks paltry when it is considered that Verity is getting its hands on what remains of Ultraseek Corp, which Inktomi bought from Disney in June 2000 for $344.7m to first get into the enterprise search marketplace, and Quiver Inc, which Inktomi paid $12m for just four months ago.

The deal is a steal for Verity. The company gets its hands on not only what CEO Gary Sbona calls "stellar" technology for search, categorization and XML handling, but on an annual revenue stream of about $20m, Inktomi's 2,500 customers, and a route into the lower-end basic search market that has so far eluded it.

"We've given ourselves a really solid footing in the basic search space, where we've quite frankly struggled with our enterprise products," Sbona said in a conference call with analysts and investors yesterday. "Inktomi built a primarily department-level customer base that is highly complementary to our enterprise customer base."

Verity expects the deal to be accretive to earnings two quarters after the acquisition closes, expected in 30 to 60 days. Loss-making Inktomi said the divestiture will make it immediately cash flow positive and profitable before interest, tax, depreciation and amortization (EBITDA).

Inktomi's plan is to focus exclusively on web search, the market the company was founded to address, and intends to make some technology upgrade announcements shortly. In the year to September 30, the business brought in $47.1m, versus $51.2m in 2001. The biggest customer is Microsoft Corp, which uses the engine to power its MSN search site.

Verity's plan is to gradually integrate Inktomi's technology into its own K2 line of knowledge management products, with the first step being integration of Ultraseek results sets into its information retrieval software. The company will also attempt to migrate or up-sell Inktomi users to its high-end products.

Verity will offer jobs to about 40 Inktomi sales and development employees and has also agreed to take over "basic customer support obligations" from Inktomi.

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